FEDERAL COURT OF AUSTRALIA

Chen v Commissioner of the Australian Federal Police [2017] FCA 1558

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application for preliminary discovery be dismissed.

2.    The prospective applicant pay the prospective respondent’s costs as assessed or agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BROMWICH J:

1    This is an application for preliminary discovery made by Ms Xin Yu Chen pursuant to r 7.23 of the Federal Court Rules 2011 (Cth). Ms Chen, the prospective applicant, asserts that she may have the right to obtain relief from the Commissioner of the Australian Federal Police (AFP), the prospective respondent, by way of judicial review of the issue of two search warrants obtained by an officer of the AFP. The relief that Ms Chen has in contemplation is the setting aside of the search warrants, and the return of the material seized as described generally in the next paragraph.

2    On 3 July 2017, the two search warrants were executed on Ms Chen’s premises in Melbourne and on a car she owns. Ms Chen deposes to the seizure from her premises of banknotes totalling about $250,000 in United States currency and about $280,000 in Australian currency, together with gold bars, gold coins and jade valued at approximately $540,000. Nothing was seized from the car.

3    Ms Chen seeks, by way of preliminary discovery by the Commissioner, access to the affidavit by which the issue of the search warrants was procured from the issuing officer, a Victorian magistrate. Access to the affidavit is sought in order to consider whether to bring judicial review proceedings challenging the sufficiency of the information on oath before the magistrate to ground the issue of the search warrants. It is not in doubt that it would be practically impossible for Ms Chen to decide whether to bring proceedings challenging the issue of the search warrants, or to be able to assess whether such proceedings might be successful, without access to the affidavit. However, the existence of the necessity for access to material is not, of itself, sufficient for preliminary discovery to be granted.

4    A prospective applicant may apply to the Court for an order for preliminary discovery under r 7.23 of the Federal Court Rules 2011 (Cth), which is in the following terms:

7.23    Discovery from prospective respondent

(1)    A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant:

(a)    reasonably believes that he or she may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained; and

(b)    after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and

(c)    reasonably believes that:

(i)    the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent’s control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief; and

(ii)    inspection of the documents by the prospective applicant would assist in making the decision.

(2)    If the Court is satisfied about matters mentioned in subrule (1), the Court may order the prospective respondent to give discovery to the prospective applicant of the documents of the kind mentioned in subparagraph (1) (c) (i).

5    It is not in issue that Ms Chen has met the requirements of r 7.23(1)(b) or (c). It was clear that her requests to obtain the search warrant affidavit from the Commissioner had been refused. Similarly, there was no doubt that she holds a reasonable belief that the Commissioner has custody of at least a copy of the affidavit and that inspection of it would assist in making the decision about whether to commence judicial review proceedings of the kind in contemplation. The only live issue is whether Ms Chen has demonstrated, as required by r 7.23(1)(a), that she “reasonably believes that … she may have the right to obtain relief in the Court from” the Commissioner. The determination of this application therefore requires careful consideration of what is required to be established under r 7.23(1)(a), and whether Ms Chen has successfully met that hurdle.

6    The Commissioner opposes Ms Chen’s application. He asserts that an order for preliminary discovery ought not be made because Ms Chen has failed to satisfy the requirements of r 7.23(1)(a), insofar as she has not shown that her belief that she may have a right to relief is held on objectively reasonable grounds. If access was to be ordered by way of preliminary discovery, the Commissioner foreshadowed seeking that it be made subject to the hearing and determination of a claim for redactions of the search warrant affidavit on the ground of public interest immunity.

7    Both parties relied upon Poole v Australian Pacific Touring Pty Ltd [2017] FCA 424. In that case, I summarised the general body of principles developed in relation to the requirements for a successful application for preliminary discovery in this Court. There was no issue raised as to the correctness of this summary (at [39]):

(1)    Rule 7.23 is to be beneficially construed and given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case: Optiver [Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCAFC 133; (2008) 169 FCR 435] at 444-5 [43] quoting with approval St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; 211 ALR 147 at 153 [26(a)] and Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733.

(2)    Each of the pre-requisites set out in r 7.23(1) must be met before the discretion in r 7.23(2) is enlivened: St George Bank Ltd at 153 [26(b)], citing Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at 11 [38].

(3)    Not every element of any relevant cause of action must be established, provided there exists a reasonable cause to believe the prospective applicant “may have” a right to obtain the relief: Optiver at 445-6 [48].

(4)    A “belief” requires more than mere assertion and more than suspicion or conjecture. The evidence must “incline the mind towards the matter of fact in question”: Optiver at 446 [48], citing, inter alia, John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 at [13], [14], [17] and [73].

(5)    The rule does not speak in terms of a belief in the existence of a cause of action. It speaks of a right to relief. By reason of the expression “may have”, the rule is concerned with a belief in the possibility (not the existence) of such a right: Sandhurst Trustees Limited v Clarke [2015] FCAFC 21; (2015) 321 ALR 1 at 16 [24], citing EBOS at 540 [31].

(6)    The notion that an order for preliminary discovery is no longer appropriate once a prospective applicant has sufficient information to meet the threshold of “a bare pleadable case” is fundamentally inconsistent with the purpose of the rule, which is concerned not just with reasonable belief as to the possible right to relief, but also with whether the cost and risk of litigation is worthwhile: Optiver at 443 [35]-[36]. It follows that the question posed by r 7.23(1)(b) is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent, but rather whether the applicant has sufficient information to make a decision whether to commence proceedings in the Court.

(7)    It is not an answer to an application to say that preliminary discovery is in the nature of a fishing expedition, because that is precisely what such a rule contemplates: St George Bank at 154 [26(h)].

8    In Poole, I also said the following as to certain of the specific requirements imposed by r 7.23 of the Federal Court Rules that are relevant to this application:

42    As expressed in r 7.23(1)(a) and (c), when read with r 7.23(2), the current requirement is that the Court is satisfied that the prospective applicant “reasonably believes” the matters stipulated by the rule. An ordinary reading of this expression is that the required belief is actually held, albeit “reasonably”. That is, the prospective applicant must prove a subjective state of belief, the reasonableness of which is to be assessed objectively by reference to the circumstances giving rise to that belief. So read, the requirement is much the same as would be imposed by the expression that a person has “reasonable grounds for believing”.

43    In George v Rockett (1990) 170 CLR 104 at 112, it was stated:

When a statute prescribes that there must be “reasonable grounds” for a state of mind – including suspicion and belief – it requires existence of facts which are sufficient to induce that state of mind in a reasonable person.

44    The existence of both a subjective and objective element in tests framed in these terms was articulated by Gageler J in Prior v Mole [2017] HCA 10 [343 ALR 1; 91 ALJR 441], where his Honour, commenting on the expression “if the member has reasonable grounds for believing”, stated:

23.    … What is required to satisfy a precondition expressed in those “widely used” terms was spelt out in George v Rockett.

24.    First, the member must have an actual subjective belief of each of the specified matters. Belief is more than “suspicion”; it is not merely an “apprehension” or even a “fear”; it is an actual “inclination of the mind”. Second, the subjective belief of the member must be a belief that is formed by the member by reference to objective circumstances. The relevant objective circumstances are those known to and taken into account by the member forming the belief” …

9    The requirements for preliminary discovery have been considered in a decision of the Full Court, delivered after judgment was reserved in this matter, in Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCAFC 193. Nothing in that decision casts doubt upon the correctness of the above observations in Poole. A number of key points emerging from Pfizer are as follows:

(1)    Allsop CJ generally agreed with both of the separate judgments of Perram J and Nicholas J, subject to a number of further observations, including a concern expressed at [8] about prior decisions in this Court on this topic that, while not in terms incorrect, appeared to have a:

… tendency to create an overly abstracted conceptualisation of refined states of mind which, if the words of the rule are not kept in mind, can lead in application to a misstatement of the essence of the rule, focused as it is upon what may be the position. The foundation of the application in r 7.23(1)(a) is that an applicant (a person or a corporation) reasonably believes that he, she or it may have a right to relief. The belief therefore must be reasonable (expressed in the active voice that someone reasonably believes) and it is about something that may be the case, not is the case. It is unhelpful and likely to mislead to use different words such as “suspicion” or “speculation” to re-express the rule. For instance, it is unhelpful to discuss the theoretical difference between “reasonably believing that one may have a right to relief” and “suspecting that one does have a right to relief” or “suspecting that one may have a right to relief” or “speculating” in these respects. The use of such (different) words and phrases, with subtleties of differences of imprecise meaning, and not found within the rule itself is likely to lead to the proliferation of evidence and of argument, to confusion and to error. One must keep the words of the rule firmly in mind in examining the material that exists in order to come to an evaluation as to whether the relevant person reasonably believes that he or she may have a right to relief. That evaluation may well be one about which reasonable minds may differ.

(2)    Perram J observed:

108    As I have noted already, it is not the requirement of this rule that there be a reasonable belief that there is a right to obtain relief. This is an important qualification and it colours necessarily the analysis involved in assessing the reasonableness of the belief. FCR 7.23(1) is not about giving preliminary discovery to those who believe they do have a case. Its wording unequivocally shows that it is about those who do not know that they have a case but believe that they may. In terms, it authorises what traditionally have been referred to as fishing expeditions; that is to say, evidentiary adventures in which the goal is not to find proof of a case already known to exist, but instead to ascertain whether a case exists at all.

109    The former Order 15A Rule 6 took effect on 26 April 1988 and as early as 1990 it was held that it authorised ‘fishing’ in this sense. Burchett J observed in Re Paxus Services Ltd v People Bank Pty Ltd [1990] FCA 500; (1990) 99 ALR 728 at 733 [13] that it was ‘no answer to the applicant’s application under rule 6 to say that the proceeding is in the nature of a fishing expedition…’. That statement was, in turn, assumed to be correct by the Full Court in Bailey v Beagle Management Pty Ltd [2001] FCA 60; (2001) 105 FCR 136 at 143 [27].

110    Consistently with this broad view, recent authority in this Court has affirmed that the question is whether there is a belief that a right to obtain relief may exist: see, e.g., Bonham v Iluka Resources Ltd [2017] FCAFC 95 at [49]. And some first instance judges have, with respect, been astute to observe that a belief that a right to obtain relief in fact exists is certainly not what the rule requires: Toll Transport Pty Ltd v Fleiter [2017] FCA 376 at [15] per Logan J; Poole at [39(5)] per Bromwich J.

(3)    Nicholas J observed:

176    … in my opinion, a requirement that a person reasonably believe that a particular state of affairs may exist will not be satisfied by evidence that does not incline the mind to the existence of that state of affairs.

177    The function of the words “or may have” in the former rule was to make clear that the relevant belief need not incorporate a firm view that there is a right to relief. This was the view expressed by French J in East Grace Corporation v Xing (No 2) [2005] FCA 1266 at [36], which was later endorsed by a Full Court in Telstra Corporation Limited v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64 at [58]. Consistently with that view, I do not think those words were intended to allow a prospective applicant to obtain an order for preliminary discovery in circumstances where there existed nothing more than a mere possibility that the prospective respondent may have engaged in conduct which, if proven, would entitle the prospective applicant to relief.

10    Ms Chen does not have to go so far as to demonstrate the viability of a judicial review challenge that she wishes to be armed to consider commencing. She does not have demonstrate that she believes that she, in fact, has a right to relief. She does not even have to demonstrate a belief pertaining to any precise cause of action for the relief that she hopes to be able to obtain. However, she does need to meet the test in r 7.23(1)(a) by establishing the existence of a belief held by her, or on her behalf, on reasonable grounds, that she may have a right to obtain relief in this Court from the Commissioner.

11    This case proceeds upon the basis that it is sufficient if the necessary belief was deposed to and established by a combination of the affidavits of Ms Chen and her solicitor, including the annexed search warrant and transcript of a police interview with Ms Chen: see Poole at [63]-[64]. Accordingly, the inquiry is whether the requisite state of mind is held by Ms Chen on objectively reasonable grounds. The objective basis for the belief held must be more than a mere theoretical possibility of circumstances giving rise to a right to relief. There must be some reasonable objective basis for believing that such a right to relief may exist, drawn from the known, or reasonably inferred, facts and circumstances. This may require consideration of the legal framework giving rise to any such relief in order to assess the reasonableness of the asserted belief, because the belief held must be both factually and legally reasonable.

12    While care must be taken not to elevate the belief that Ms Chen was required to hold (or have held on her behalf) beyond the requirements drawn from the authority that is summarised above, it is instructive to identify in general terms what the grounds would be for relief based upon an assertion that the issue of the search warrants was invalid. There was no suggestion made on behalf of Ms Chen that the warrant was defective on its face or improperly executed, noting that neither of those grounds for relief would ordinarily require access to the affidavit: see Caratti v Commissioner of the Australian Federal Police [2017] FCAFC 177 at [31]-[44].

Challenges to the issue of a search warrant

13    The case in contemplation by Ms Chen entails a challenge to the legal sufficiency of the material that was before the magistrate to ground the issue of the search warrants under s 3E(1) of the Crimes Act 1914 (Cth). In summary terms, the issue of a search warrant under that provision will only have been open to the issuing officer if the material provided on oath or affirmation was capable of satisfying him or her that:

(1)    there were reasonable grounds for suspecting that there was, or there would be within the next 72 hours, at the relevant premises;

(2)    anything with respect to which there were reasonable grounds for suspecting that it would afford evidence as to the commission of the offence or offences to which the warrant relates.

14    The nature and difficulties of the challenge in contemplation by Ms Chen were helpfully articulated in the authorities set out below.

15    In Williams v Keelty [2001] FCA 1301; 111 FCR 175, Hely J observed:

166    It is the issuing officer who is required to be satisfied that there are reasonable grounds for suspecting the relevant matters. The notion of reasonable grounds for a suspicion imports an objective test, but "reasonable" involves a value or normative judgment (Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125 at 167), and there may well be legitimate differences of opinion as to what falls within the term, particularly when it is used in relation to a nebulous expression such as "suspicion". A Court is not entitled to substitute its own opinion on that question for the opinion of the issuing officer. That does not mean that the issuing officer has an unexaminable discretion; it does mean, however, that the issuing officer's decision is only impeachable if the decision was one which the officer could not lawfully reach on the materials before him: Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 275-276.

167    In George v Rockett at 111, the High Court said that it was implicit in the precursor to s 3E, which was under consideration in that case, that the applicant for the search warrant should entertain the suspicion to which the section refers. The issuing officer must be satisfied that there are reasonable grounds for entertaining the relevant suspicion, without any requirement that the issuing officer must also entertain the relevant suspicion. However, it must appear to the issuing officer, not merely to the person seeking the search warrant, that reasonable grounds for the relevant suspicion exist: George v Rockett at 112.

16    Hely J in Williams v Keelty then conducted a detailed analysis of the complicated and difficult to prove suspected offences in that case and the affidavit by which the search warrants were obtained referring to those offences. His Honour found that there was no inadequacy in the information provided in the search warrant affidavit before his Honour, emphasising that the issuing officer’s satisfaction that there were reasonable grounds for the dual suspicions in s 3E(1) of the Crimes Act is “a low threshold requirement”. His Honour observed:

192    It may be that the suspicions held by the applicant for the warrant in relation to this or other suspected offences will turn out not to have been well founded. Documents seized pursuant to the search warrants might themselves establish this to be so. But the requirement is only that the issuing officer be satisfied that there be reasonable grounds for suspecting – a requirement which may be satisfied even though it may later emerge that the suspicions were not well founded.

…

211    … In my view, it was open to the issuing officer to form the opinion which he did upon the basis of the facts alleged in the application. That opinion, of course, is only that there are reasonable grounds to suspect, which as I have already indicated, is a low threshold requirement.

17    In Caratti, the Full Court pointed out at [34] that:

In all challenges to the validity of the issue of a search warrant, the usual restraints on judicial review intervention will apply. This includes, most importantly, the principle that the decision manifested in the search warrant issued must be read beneficially, and not with an eye keenly attuned to the perception of error: Minister for Immigration And Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 271-2. However, application of that principle must accommodate the purposes of a search warrant in informing both those executing it and occupiers as to the scope of the search that is authorised. The scope of a search warrant may be far from precise given that it is issued for an investigative purpose, based upon the low threshold of “suspicion” being met. All that really means is that an error or misdescription must be shown to be material to the purposes of a search warrant. However when it comes to mismatches between the information and the search warrant, that feature must not be approached with undue technicality or any requirement for excessive precision. Practical considerations must always be kept steadily in mind: Baker v Campbell (1983) 153 CLR 52 at 83.

18    In Wong v Commissioner, Australian Federal Police [2014] FCA 443, Pagone J made the following observations about the “difficult and exacting” task facing any person seeking to vitiate the issue of a search warrant. His Honour outlined the approach to be taken by reference, in particular, to the offences under investigation that are referred to in the search warrant (emphasis added):

4    It is for the applicant to establish that the Magistrate could not have been satisfied that there were reasonable grounds for suspecting that there would be evidential material at the applicant’s premises which satisfied the three conditions: Williams v Keelty (2001) 111 FCR 175 [236]; Kennedy v Baker (2004) 135 FCR 520, [85]-[86]; Egglishaw v Australian Crime Commission (2006) 230 ALR 254, [19]. An applicant seeking to challenge a warrant on the basis of the issuing officer not having reasonable grounds for the suspicion required to issue the warrant has a difficult and exacting task. The burden to be discharged, and the analysis by which it may be discharged, was considered in Williams v Keelty (2001) 111 FCR 175. The applicant must establish that there was an absence of what his Honour referred to in Williams v Keelty as the “foundational facts” from which the issuing officer might have had the relevant suspicion on reasonable grounds. Identifying the foundational facts will proceed from the relevant offences, bearing in mind that an applicant must show the absence of reasonable grounds for suspicion that those offences have been committed. For these purposes “suspicion” is not the same as a belief, but is a “state of conjecture or surmise” or a “slight opinion, but without sufficient evidence” (George v Rockett (1990) 170 CLR 104, 115), although it does require some factual basis upon which a suspicion can be based of a kind that would “create in the mind of a reasonable person […] an actual apprehension” of the relevant fact (Queensland Bacon Pty Ltd v Rees (1996) 115 CLR 266, 303).

5    The issuing magistrate stated in the warrant that she was satisfied that there were reasonable grounds for suspecting that there was evidential material at the premises that the applicant had committed the specific offences stated in the warrant. The applicant, wishing to challenge that basis of issue of the warrant, must establish that there was not before the Magistrate information sufficient to have founded a suspicion on reasonable grounds that there was or would be evidential material of the offences identified in the warrant. That, in this case, will require an analysis of the relevant offences, the identification of the potential facts relevant to those offences, and establishing that whatever information had been before the issuing Magistrate could not have supported a suspicion that there would be evidential material at the premises relevant to those offences.

6    The nature of the offences in question is such that proof of their commission will depend in many cases upon circumstantial evidence, patterns of conduct and inferences. The first offence identified in the warrant is that in s 142(1) of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) … The second offence identified in the warrant is that in s 400.9 of the Criminal Code […] (Cth) which relevantly provides:

(1)    A person commits an offence if:

(a)    the person deals with money or other property; and

(b)    it is reasonable to suspect that the money or property is proceeds of crime; and

(c)    at the time of the dealing, the value of the money and other property is $100,000 or more.

[…]

7    The issue of the warrant required “the existence of facts which [were] sufficient to induce [the relevant] state of mind in a reasonable person” (George v Rockett (1990) 170 CLR 104, 112), namely, a suspicion, in the mind of a reasonable person (George v Rockett at 111-2), that evidential material was, or within a period of time would be, present at the applicant’s premises which could afford evidence of the commission by the applicant of the offences in those sections. The facts necessary to induce the relevant state of mind in a case such as this, and which an applicant must show were not before the issuing Magistrate, may include facts of patterns of conduct, interpositions of people, interpositions of accounts, relationships between the parties and circumstantial evidence (including inferences) of dealings and conduct which may bear upon the applicant being a party to non-reportable transactions relevant to a possible offence under s 142 or which may bear upon whether the applicant dealt with money or property suspected to be the proceeds of crime relevant to a possible offence under s 400.9. Material sufficient to found a suspicion need not be admissible evidence nor need it be correct. In Williams v Keelty his Honour considered foundational facts to include such matters as: reports from newspapers (at [171]); material “falling well short of a prima facie case” (at [172]); matters that “could not be put in evidence at all” (at [176]); “a pattern of conduct” (at [185]); and the fact that the applicant for the warrant was also satisfied of a suspicion on reasonable grounds of an offence having been committed (at [165] and [214]).

8    His Honour in Williams v Keelty at [211] observed that the opinion for the issuing officer to form was “a low threshold requirement”. Conversely, the threshold for an applicant challenging the existence of that low threshold is correspondingly high. The making of an application to challenge a warrant does not create an obligation upon a respondent to establish that there were reasonable grounds for the suspicion formed by the issuing officer and applications to set aside warrants should not be made without foundation. Applications for judicial review of the issue of search warrants should not be brought in the hope of finding, or fishing for, error. The issuing officer was not required to give reasons and judicial review of her decision is not to be treated as an appeal as to its correctness or as the commencement of an inter partes hearing de novo of the application for the search warrant. The onus to make good the challenge remains with the applicant: Williams v Keelty at [236]; Kennedy v Baker (2004) 135 FCR 520, [85]-[86]; Egglishaw v Australian Crime Commission (2006) 230 ALR 254, [19]. In Ousley v The Queen (1997) 192 CLR 69 Gummow J said at 130-1:

The more appropriate principle is that the validity of an administrative act or decision and the legality of steps taken pursuant to it are presumed valid until the act or decision is set aside in appropriate proceedings. Where “acts are of an official nature…everything is presumed to be rightly and duly performed until the contrary is shown” [Broom, A Selection of Legal Maxims, 10th ed Kersley (1939), p 642].

The presumption of regularity is not called into question just by the making of an application for judicial review. It is for the applicant to show error before it may be thought necessary to consider whether there are reasonable grounds for the issuing Magistrate’s suspicion of the commission of offences.

19    To the extent that Ms Chen has indicated that she wishes to consider not just challenging the issue of the search warrants, and thereby obtaining the relief of having them set aside, but also obtaining the collateral or consequential relief of having the seized material returned to her, it should be noted that success as to obtaining the first category of relief does not inevitably, or necessarily even readily, result in the second category of relief being granted. It is well-established that this Court may exercise a discretion not to order the return of material seized pursuant to a search warrant that has been found to be invalid. The rationale for the exercise of that discretion is that the fate of the seized material may, in certain circumstances, best be left to the criminal courts for a determination as to admissibility: see Caratti at [152]-[153], citing Puglisi v Australian Fisheries Management Authority (1997) 148 ALR 393; Cassaniti v Croucher (1997) 37 ATR 269; Wright v Queensland Police Service [2002] QSC 46; [2002] 2 Qd R 667; and CC v Rayney [2012] WASC 56; 42 WAR 498.

20    None of the evidence relied upon by Ms Chen was directed to any separate belief that she may have a right to have the seized material returned to her if the search warrants were set aside. Rather, it seems to have been assumed, incorrectly, that this would be automatic consequential relief flowing from success in obtaining the primary relief of having the search warrants set aside. It follows that this basis for preliminary discovery has not been established and the only relief that needs to be considered further is the primary relief of setting aside the search warrants.

The terms of the search warrants

21    The two search warrants were in substantively identical terms. The relevant parts were as follows, drawn from the search warrant for Ms Chen’s premises (identifying information omitted):

To: [AFP officer]

A constable within the meaning of the Crimes Act 1914, who is the executing officer in relation to this warrant;

And to any other constable whose name may be written on this warrant in accordance with section 3C(1) of the Crimes Act 1914, in which event that constable shall be the executing officer in relation to this warrant:

Whereas I [Magistrate’s name]

an issuing officer within the meaning of section 3E of the Crimes Act 1914, am satisfied by information on oath that there are reasonable grounds for suspecting that there is (or will within the next 72 hours be) at the premises located at:

[Address], more fully described as a two bedroom apartment including any garages, or storage areas attached, assigned or allocated thereto and motor vehicles thereon, which are used by the occupants of the premises

Evidential material, as defined in the Crimes Act 1914, which satisfies ALL of the following three conditions namely:

First condition: Things which are:

•    Australian and/or foreign currency reasonably suspected to be the proceeds or instrument of crime

•    Computers (including laptops), computer hardware and software, and any attached or peripheral devices, including but not limited to removable storage devices

•    Mobile telephones handsets, mobile telephone packaging and Subscriber Identity Modules (SIM cards)

•    Bags, suitcases, luggage, wrapping, plastic or containers

•    Keys

•    Machines and/or equipment used for vacuum packing or sealing

•    Machines and/or equipment used for cash sorting or counting

Originals or copies of any one or more of the following, including any of them which are stored on a computer, or on a computer storage device, or on any other type of storage medium or storage device:

•    Bank statements

•    Bank cards including but not limited to credit cards and debit cards

•    Correspondence including but not limited to letters, facsimiles and emails

•    Bank receipts and records

•    Handwritten or typed notes

•    Notebooks

•    Diaries

•    Account books and ledgers

•    Financial documentation

•    International Funds Transfer Instruction Documents

•    Taxation records

•    Invoices

•    Transaction receipts

•    Emails

•    Online internet correspondence

•    Telephone records including but not limited to contracts for service, invoice accounts and statements

•    Utility records including but not limited to contracts for service, invoice accounts and statements

•    Travel documentation

•    Documents of identity, including, but not limited to drivers licences and passports

•    Business records, documentation and correspondence

Together with any manual, instruction, password or other thing that assists to gain access to or interpret or decode any of the above things.

Second condition: And which relate to any one or more of the following:

•    Xinyu CHEN

•    Tonia CHEN

•    Yin ZHU

•    Victoria Registration XEB784

•    G22934505

•    HBE Group Pty Ltd

•    Telecommunications service 0435751105

•    Telecommunications service 0430890619

Third condition:

And as to which there are reasonable grounds for suspecting that they will afford evidence as to the commission of the following indictable offence(s) against the laws of the Commonwealth:

Between April 2017 and June 2017 at Melbourne in the State of Victoria, Xinyu CHEN, did deal in property, namely currency valued at greater than $100,00 reasonably suspected of being proceeds of crime; and

Between April 2017 and June 2017 at Melbourne in the State of Victoria, Yin ZHU did deal in property, namely currency valued at greater than $100,000 reasonably suspected of being proceeds of crime.

I hereby issue this warrant which authorises you to enter and search the premises described above.

AND by virtue of section 3F(1) of the Crimes Act 1914 this warrant authorises the executing officer or a constable assisting to do all of the following; …

22    As noted above at [13], the case that Ms Chen wishes to consider bringing entails a challenge to the legal sufficiency of the material that was before the magistrate to ground the issue of the search warrants. That consideration focuses upon the reference to the offence in the third condition of the search warrants set out above. It is therefore necessary to have regard to the elements of that offence. The offence is dealing with property reasonably suspected of being proceeds of crime, contrary to s 400.9(1) (to be read with subsection (2)) of the Criminal Code (Cth) (being a self-contained code legislated as a schedule to the Criminal Code Act 1995 (Cth)), as follows:

400.9    Dealing with property reasonably suspected of being proceeds of crime etc.

(1)    A person commits an offence if:

(a)    the person deals with money or other property; and

(b)    it is reasonable to suspect that the money or property is proceeds of crime; and

(c)    at the time of the dealing, the value of the money and other property is $100,000 or more.

Penalty: Imprisonment for 3 years, or 180 penalty units, or both.

…

(2)    Without limiting paragraph (1)(b) or (1A)(b), that paragraph is taken to be satisfied if:

(a)    the conduct referred to in paragraph (1)(a) involves a number of transactions that are structured or arranged to avoid the reporting requirements of the Financial Transaction Reports Act 1988 that would otherwise apply to the transactions; or

(aa)    the conduct involves a number of transactions that are structured or arranged to avoid the reporting requirements of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 that would otherwise apply to the transactions; or

(b)    the conduct involves using one or more accounts held with ADIs in false names; or

(ba)    the conduct amounts to an offence against section 139, 140 or 141 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006; or

(c)    the value of the money and property involved in the conduct is, in the opinion of the trier of fact, grossly out of proportion to the defendant’s income and expenditure over a reasonable period within which the conduct occurs; or

(d)    the conduct involves a significant cash transaction within the meaning of the Financial Transaction Reports Act 1988, and the defendant:

(i)    has contravened his or her obligations under that Act relating to reporting the transaction; or

(ii)    has given false or misleading information in purported compliance with those obligations; or

(da)    the conduct involves a threshold transaction (within the meaning of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006) and the defendant:

(i)    has contravened the defendant’s obligations under that Act relating to reporting the transaction; or

(ii)    has given false or misleading information in purported compliance with those obligations; or

(e)    the defendant:

(i)    has stated that the conduct was engaged in on behalf of or at the request of another person; and

(ii)    has not provided information enabling the other person to be identified and located.

23    Section 400.9(4) of the Criminal Code provides that absolute liability applies to the second element in s 400.9(1)(b). That means that there is no fault element attaching to the second physical element of it being “reasonable to suspect that the money or property is proceeds of crime”. The prosecution does not need to prove that the accused had any subjective state of mind at all about the provenance of the money or property, let alone any state of mind amounting to a reasonable suspicion that the money or other property is the proceeds of crime. Moreover, the defence of mistake of fact is not available: see s 6.2(1) of the Criminal Code.

24    The nature of the offence in s 400.9 was considered in some detail in Lin v R [2015] NSWCCA 204; 297 FLR 457; 253 A Crim R 1. Lin confirms that the second element of the offence, which requires satisfaction that it was “reasonable to suspect that the money or property is proceeds of crime”, is to be assessed on an entirely objective basis. It does not entail any proof that any particular predicate indictable offence (that is, an indictable offence which gave rise to the proceeds in question) had in fact been committed: Lin at [13]-[15].

25    Moreover, if any of the deeming events listed in s 400.9(2) are present, that “expands the ambit” of s 400.9(1)(b) and provides “an alternative route to proof of the ‘reasonable to suspect’ element of the offence”: Lin at [22]-[23]. When s 400.9(2) is engaged, there is no need even to identify any predicate offence: Lin at [26]. Search warrants are “part of the investigative pre-trial process of the criminal law, often employed early in the investigation”: Baker v Campbell (1983) 153 CLR 52 per Mason J at 81, quoting from Attorney-General (Nova Scotia) v MacIntyre (1982) 132 DLR (3d) 385 at 397. Even when s 400.9(2) is not engaged, and logically that often cannot be known either way at the time when search warrants are executed in aid of a criminal investigation, no particular predicate offence is required to be proved to have been committed: see s 400.13 of the Criminal Code.

26    Section 440.9(5) of the Criminal Code provides:

This section does not apply if the defendant proves that he or she had no reasonable grounds for suspecting that the money or property was derived or realised, directly or indirectly, from some form of unlawful activity.

Note:    A defendant bears a legal burden in relation to the matter in subsection (5) (see section 13.4).

That provision means that once the prosecution has established a prima facie case that it was reasonable to suspect that particular money or property dealt with by the defendant was the proceeds of crime, the defendant may be obliged to prove a “clean source” of that cash or property. It will not suffice for a defendant to prove that the money or other property was not derived, directly or indirectly, from the commission of an offence. All forms of illegal activity must be excluded as the direct or indirect source for the derivation or realisation of the money. This is not necessarily confined to any such activity on the part of the defendant.

Ms Chen’s belief that she may have a right to obtain relief from the Commissioner

27    The right to relief in contemplation by Ms Chen is the setting aside of the search warrants on the ground that there was insufficient material before the Magistrate to justify the issue of the warrants. In that regard, a belief is asserted on Ms Chen’s behalf that there was not, nor could there have been, any basis for the Magistrate to be satisfied that there were reasonable grounds to suspect that Ms Chen had committed the offence described in the search warrants, by reference to the words in the search warrant that were drawn from the second element in s 400.9(1)(b) of “reasonable to suspect that the money or property is proceeds of crime”. The factors relied on by Ms Chen and her solicitor to reach that belief were set out in an affidavit of her solicitor as follows:

35.    I am instructed that Ms Chen and Ms Zhu did not commit the offence of dealing with proceeds reasonably suspected of being proceeds of crime contrary to section 195 of the Act or any other offence. I do not believe that there is, or could be, any reasonable basis for suspecting that any of their assets or wealth are the proceeds of crime or were unlawfully obtained. As the Affidavit of Tonia Chen sworn 18 September 2017 makes clear, all her funds are derived from legitimate sources.

36.    Consequently, I do not believe that the issuing officer, Magistrate Cameron, could have been satisfied by information on oath or affirmation that there were “reasonable grounds for suspecting there… [was] any “evidential material” at the premises. To the extent that an issuing officer is required to be satisfied that reasonable grounds exist to suspect that an indictable offence has occurred, I do not believe that there is or could be any information which could be contained in the affidavit that could give rise to such a level of satisfaction.

28    The portions of Ms Chen’s affidavit evidence that she relied upon, as identified by her counsel at the hearing of this application, were as follows:

27.    I receive cash remittances or hard currency from my parents and three other relatives each year. My parents remit to me around US$150,000 each year ($186,000). My other relatives also remit to me around US$150,000 each year ($186,000). These payments are for my living expenses. If I receive hard currency, which I bring back to Australia, I always declare this at customs at the airport as required.

28.    Thus, in total, I receive about $372,000 each year from my relatives.

29.    These amounts are gifts to me from my family. I do not pay tax on these amounts.

…

31.    There are some restrictions on the transfer of money out of China. Accordingly, I am generally in need of Australian currency. I need Australian currency for two purposes. For personal expenses, and for HBE Group’s operations.

32.    My friends provide me with the Australian currency I need for my personal expenses. All of my friends in Australia are Chinese nationals or have a Chinese background. When they travel to China, they offer to exchange with me the Australian currency they have for Chinese Renminbi.

33.    They provide me with what Australian currency they have. In return, I transfer Chinese currency from one of my relatives’ Chinese bank accounts to one of my friends’ Chinese bank accounts.

34.    We exchange the money at a reasonable rate that we find on a website, including an App called ‘Imoney’ and sometimes other websites. It is not a profit-making enterprise. It is simply a mutually beneficial arrangement amongst friends and one way we look after each other.

35.    I have about 20-30 friends with whom I can do this. Each year I receive approximately $150,000 with these exchanges. Most of the time they give me their Australian currency in cash and I keep this in my apartment.

29    Ms Chen’s counsel also placed reliance upon the following additional passages from her solicitor’s affidavit:

21.    On the same day, during the search, Ms Chen and Ms Zhu were arrested and taken to the Melbourne West Police Station.

22.    At the police station, Ms Chen and Ms Zhu were requested to participate in an interview with DSC Renwick and DSC Travis Hanson. Ms Zhu gave a no comment record of interview. Ms Chen answered all questions during the interview. Now produced and shown to me marked “SD4” is a copy of the transcript of the interview of Ms Chen, conducted on 3 July 2017.

23.    Amongst other things, Ms Chen said:

(a)    she and her aunty are directors of a company called HBE Group Pty Ltd, but she runs the company;

(b)    the company operates a land development business;

(c)    her parents are wealthy business people;

(d)    she was given about $4 million by her grandmother;

(e)    the company had about $8 million in outgoings over the past 12 months;

(f)    her family business owns property in Victoria and receive rental income

(g)    her mother had recommended that she take the money she required for the business each time she went to Australia and store it in the Apartment because of her view about banks.

24.    During the interview, I believe that neither the questions that FA [Federal Agent] Kennedy asked, nor the answers that Ms Chen gave, revealed any basis for a suspicion that Ms Chen or Ms Zhu had committed the search warrant offence, or indeed any offence.

30    In written submissions for the applicant, the position was further clarified:

The facts and circumstances known to the applicant at the time of making this application (and which objectively inform her subjective belief) are:

(a)    the applicant did not have, as at 27 June 2017, nor subsequently has, any criminal history or charges pending;

(b)     nothing asked in the recorded interview indicates that the police were aware of any incriminating fact or matter prior to the issue of the search warrant;

(c)     nothing found in the apartment indicates that the police knew of or located any incriminating evidence (in the sense that it obviously suggests ill-gotten gain as opposed to suggesting significant wealth);

(d)     the applicant asserts that she did not commit any crime,

and accordingly, she does not expect or know of any material that could have been provided to the issuing officer to support an allegation that she did commit a crime.

Consideration

31    The issuing magistrate stated in the search warrant she signed and issued that she was “satisfied by information on oath that there are reasonable grounds for suspecting that there [were] (or [would] within the next 72 hours be) at” Ms Chen’s premises, things of the kinds listed “as to which there [were] reasonable grounds for suspecting that they [would] afford evidence as to the commission of”, relevantly, Ms Chen having dealt “in property, namely currency valued at greater than $100,00 reasonably suspected of being proceeds of crime”, being an offence under s 400.9(1) of the Criminal Code.

32    Ms Chen’s case is, in substance, that there could not have been sufficient material before the magistrate to justify the issue of the warrants because she has done nothing wrong. She cannot conceive, given the basis for her asserted innocence, how the information before the magistrate could possibly have justified satisfaction that there were reasonable grounds for suspecting that there would be cash or other property present at her premises that it would be “reasonable to suspect” were “proceeds of crime”, let alone that she could reasonably be suspected of having committed an offence of dealing with property of that kind.

33    For the following reasons, Ms Chen has not demonstrated reasonable grounds for her subjective belief that she may have a right to relief against the Commissioner by way of having the search warrants set aside.

34    First, the possibility of insufficiency of material before the magistrate cannot be assessed by reference only to what Ms Chen subjectively thinks may be insufficient, but rather by reference to what may be insufficient at law. A belief based upon an incorrect understanding of the law may, for that reason alone, be unreasonable. As the extracts from Williams v Keelty, Wong and Caratti reproduced above at [15]-[18] make clear, in this case, Ms Chen needed to establish a belief on reasonable grounds that there may have been a right to obtain relief based on legal insufficiency of the material that was before the magistrate of the kind that may ground judicial review. That belief, as a practical matter, needed to be grounded on an objective basis for a belief that the issuing magistrate lawfully could not, rather than should not, have reached the necessary state of satisfaction. There is no scope for reliance by Ms Chen on a belief that she may have a right to relief because the magistrate should not have been satisfied on the material before her Honour. Yet, in substance, the basis for her asserted belief rose no higher than that.

35    Secondly, it was a “low threshold” requirement for the issuing magistrate to form the satisfaction that there were reasonable grounds for a suspicion that there would be things at Ms Chen’s premises which would afford evidence that she had, in the period from April to June 2017, dealt with property, being currency valued at greater than $100,000 that was reasonably suspected of being the proceeds of crime. The nature of the suspected offence under s 400.9(1) of the Criminal Code suggests that the “foundational facts” necessary to ground the issuing officer’s satisfaction that there were reasonable grounds for the dual suspicion in s 3E(1) of the Crimes Act would not need to be extensive. The issuing magistrate only had to be satisfied of reasonable grounds for a suspicion as to the presence of evidence and a suspicion as to its likely evidentiary value in respect of the suspected offence under s 400.9(1). Notably, that suspected offence itself refers, in turn, to an objective suspicion that currency or property is “reasonably suspected of being proceeds of crime”.

36    The issuing officer did not have to form any of those suspicions herself. Relevantly, the element of the suspected offence in issue under 400.9(1)(b) is one of absolute liability, for which there is no fault element and the defence of mistake of fact is not available. The offence element of reasonable grounds for suspecting that the money or other property was the proceeds of crime was therefore to be assessed on an entirely objective basis, and did not entail any proof that a predicate indictable offence (that is, an indictable offence which gave rise to the proceeds in question) had, in fact, been committed, whether by Ms Chen or by anyone else. Yet, a central aspect of her asserted belief relied upon her claim not to have committed a predicate offence.

37    Thirdly, measured against the “low threshold” requirement in s 3E(1) of the Crimes Act, Ms Chen’s case rises no higher than conjecture or surmise. The evidence and material circumstances advanced by her and on her behalf do not reasonably incline the mind to the belief that Ms Chen may have a right to relief on the ground that the magistrate may have erred in undertaking her statutory task. Indeed, Ms Chen’s representatives appeared to accept that there was a degree of conjecture to her belief that she may have a right to relief. It was submitted by Ms Chen’s counsel that it is somewhat artificial to expect that the prospective applicant be able to divine, or be required to guess, what the contents of the affidavit provided to the issuing officer might be. It was further submitted that, where a prospective applicant has no access to the affidavit supporting the warrant, it is arguably inevitable that she is objectively entitled to believe that she may be able to obtain relief, because she must be entitled to believe that the information furnished may have been deficient.

38    In substance, this amounts to a submission that it is enough for Ms Chen to do no more than advert to the mere “possibility” of relief, devoid of any sufficient reasonable objective foundation. That will not suffice. As was observed by Nicholas J in Pfizer at [177], it may be doubted that the words of r 7.23(1)(a) were “intended to allow a prospective applicant to obtain an order for preliminary discovery in circumstances where there existed nothing more than a mere possibility that the prospective respondent may have engaged in conduct which, if proven, would entitled the prospective applicant to relief”. The conduct here is placing before the issuing magistrate insufficient material for her to be properly satisfied that the conditions in s 3E(1) of the Crimes Act had been met.

39    Fourthly, and in any event, Ms Chen’s evidence does not necessarily support her own case that, based on the circumstances known to her, there could be no conceivable material that would justify satisfaction by the issuing magistrate of reasonable grounds for the relevant “suspicion” as to the second element of the offence. Relevantly, her affidavit, set out above, identifies where the seized cash, gold and jade had come from. However, that evidence, in seeking to establish a foundation for her belief that the magistrate may not have had a sufficient basis for the state of satisfaction reached, suffers from the vice of positively indicating that she does not have any specific knowledge of where or how, in specie, the banknotes that were seized had been obtained by the persons who gave them to her. Ms Chen’s evidence therefore leaves open the question of the legitimacy of the origin of the large volume of banknotes given to her, notwithstanding any genuine transaction between her and the person or persons who gave her that money.

40    It cannot be accepted that Ms Chen’s belief that she may have a right to relief is held reasonably. Her asserted belief rises no higher than conjecture or surmise as to a bare possibility of such a right. She has advanced no reasonable foundation for her asserted belief that she may have a right to relief by way of setting aside the search warrants on the ground that there may have been an insufficient basis for them to be issued.

41    It follows that Ms Chen has failed to meet the test in r 7.23(1)(a).

Conclusion

42    The applicant must therefore be dismissed. There is no reason why costs should not follow the event. Accordingly, Ms Chen must pay the Commissioner’s costs.

Associate:

Dated:    21 December 2017